The Business Rusch: Pay No Attention To That Man Behind The Curtain

Kristine Kathryn Rusch

The curtains are rustling. In some gilded office, a little dog with a lot of attitude has taken a green curtain in his teeth and has pulled it aside, revealing a rather plain and disappointing figure pulling a bunch of lever and shouting into a microphone.

Welcome to the shifting sands of traditional publishers. If they’re not careful, they’ll have to take their hot air balloons back to a black-and-white Dustbowl version of Kansas while an upstart girl and her motley crew of smart but insecure friends try to run Oz.

If you read farther in the Oz books, you realize that the motley crew becomes a smarter and more benevolent version of the Wizard himself—but if a motley crew of writers are going to take over publishing, that possibility is still far in our future.

At the moment, traditional publishing is trying to scare everyone with its bluster, pyrotechnics, and gigantic floating green head. (Sorry, couldn’t resist.)

But that “mangy little dog” has pulled the curtain back, and anyone who looks in the correct direction can see just how scared that unremarkable man is. He’s terrified, so he wants to terrify everyone else too.

Oz the Great And Terrible, indeed.

For decades, no one looked behind the curtain. Oh, the occasional writer managed to peer past that lovely satin green and see the little man, but he bribed her or at least paid her court costs, and she remained silent.

Sometimes she brought an entire organization with her to challenge the Wizard. The organization notified its members of the Wizard’s bad practices, but everyone assumed that the Wizard’s buddies—the other wizards—weren’t quite as bad, so it was all okay.

But it wasn’t okay. When you’re the only game in town, you get to do what you want. Everyone has to look the other way, because there is no other good choice.

Times have changed. Traditional publishing is no longer the only game in town.

Everything about this industry is in flux and a lot of people have noticed.

Take, for example, the United States Justice Department. Word has leaked over the past several weeks that the Justice Department is investigating five major trade publishers along with Apple for anti-trust violations.

Writers and publishing blogs have dealt with this mess a lot, mostly discussing whether or not the five big trade publishers colluded when they formed the agency pricing model with Apple and, eventually, with other major e-book distributors. A lot of words have been wasted on this even though no case has been filed, and no one really knows what kind of case the Justice Department is pursuing.

Even the president of the Author’s Guild, Scott Turow, weighed in. Turow, a high-powered lawyer as well as a high-powered writer, went so far as to say that the Justice Department should reconsider because (horror of horrors!) such a suit would benefit Amazon, which Turow sees as a Wicked Witch of the West, determined to destroy publishing, bookstores, and writers all by its little own self.

His position is jaw-dropping, not just for his complete misunderstanding of the way that Amazon’s entry into the e-book marketplace has benefitted writers, but because he’s a lawyer. He should know better than to judge the merits of any case before the case is filed.

Besides, Turow, like so many others in this brouhaha, seems to forget that the matter under investigation involves five publishers and Apple. Is the Justice Department going after publishers per se? Or do they see bigger fish?

Tim Caromody has a marvelous piece on this very issue on Wired’s website. Called “Bigger Than Agency, Bigger Than E-Books: The Case Against Apple and Publishers,” the article deconstructs what Justice is actually looking into. And it seems that Justice sees this potential case as part of a string of cases that it’s bringing against technology companies in general and Apple in particular. If you want to see an excellent analysis of the issues being examined, read this piece.

Unlike Turow, I’m not going to get into the trap of talking about a potential case that may or may not ever get filed. What I want to point out is a quote from Sharis Pozen, a Justice Department antitrust official. Pozen was interviewed about this case in The Wall Street Journal (and the link hides behind a paywall, so I’m not going to reference it. If you subscribe to the Journal you can get to the link through the Wired article). The Journal has been the source of a lot of information about the government’s case, which is a tactic. The Justice Department is sending out feelers, to get information from others, yes, but also to see the reaction to its possible case.

Anyway, Pozen said, “We don’t pick business models—that’s not our job. But when you see collusive behavior at the highest level of companies, you know something’s wrong. And you’ve got to do something about it.”

Most analysts have focused on the first and last sentences of that quote, but the middle sentence is the one that interests me. When you see collusive behavior at the highest level of companies, you know something’s wrong.

I have known for decades that collusive behavior exists in publishing, although I have not personally been involved in any “at the highest level.” I’ve seen it at lower levels, from editors warning each other away from writers because the writers are litigious or business minded or just terrible people to work with, from publishers discussing troublemakers with each other, and other things. Whether or not this rises to the level of collusion under the legal definition, I have no idea (although I have my doubts), but it exists and has for a long time. I suspect such behavior at the higher levels for everything from the development of the returns system in the 1930s to the high discounts for chain bookstores in the 1990s, but such things are old, stale, unimportant, and probably unprovable.

What matters for today’s blog is this phrase: when you see…

Behavior like that which Pozen referenced was invisible in the past. Traditional publishers had no great competition, so no one had a vested interest in bringing bad behavior to light.

Now all the little dogs are pulling back curtains, and we’re seeing evidence of everything from misleading royalty statements to possible collusive pricing behavior.

Traditional publishing has been Big Business for decades, bringing in billions (yes, with a “b”) of dollars in this country alone. But traditional publishing has presented the persona of a mid-19th century shopkeeper, there for the good of the field. All those articles you see about defending quality and about the importance of publishers toward “literature” come from this projection that traditional publishers’ spokespeople put out into the world.

But traditional publishers haven’t cared about literature in more than 130 years, if they ever did. Sure, they wanted to keep the difference between high-brow and low-brow writings alive in the late 19th century because they wanted to have different price points for their products. A high-brow product (literature) came out in expensive hardcover, sold only to those with money. The low-brow product (that nameless stuff the unwashed read) came out in broadsheets and daily newspapers and in dime-novels, cheap reads for cheap folk.

As is so often the case, the myth never meets the reality. Since I’m quoting favorite movies tonight, let me quote yet one more—The Man Who Shot Liberty Valance: “When the legend becomes fact, print the legend.” Yep. And then people believe the legend as truth.

As they have with traditional publishing for years.

But I’ve been writing about the disconnect between the way traditional publishing presents itself and the way it actually behaves for at least two years now. You’re all familiar with the curtain being pulled back on this part of the industry. Most of you aren’t surprised at traditional publishing acting badly toward its writers or its readers.

Traditional publishing isn’t afraid of its readers or its writers. It still behaves like the Great and Powerful Oz, expecting us to fall to our knees. The thing is, most writers and many readers will continue to accept the myths.

Traditional publishers even expect the occasional pushback from the government or some kind of legal hassle from some large corporation. That’s one of the many reasons traditional publishers have teams of lawyers on retainer. In the past, issues like the one that Justice is bringing up got settled before a case is even brought. Someone negotiates a huge fine and then the matter gets dropped. For all we know, that might happen here.

All those men (and women) behind the curtain of traditional publishing are feeling exposed not just from places like writerly blogs, publishing websites, or the Justice Department, but from within their own companies.

This week, Publisher’s Weekly had a fascinating article on Random House. Random House’s earnings report for 2011 came out, and buried in the press release were some interesting items (besides the amount of digital profits).

Random House, which is a corporation in and of itself, is owned by a multinational media corporation called Bertelsmann. Bertelsmann operates in 50 countries and had 15.3 billion dollars in revenue in 2011. Nearly 80% of that revenue comes from Europe. It made only 14.3% of that revenue in the United States.

In other words, Bertelsmann is huge. Or as it says in modest tiny type on its website “Bertelsmann AG is the world’s most international media company.”

We writers never think that the CEO of a traditional publishing company like Random House has to answer to someone in an even larger organization. But they do. And in this case, the new chairman and CEO of Bertelsmann AG, Thomas Rabe, put Random on notice that changes would happen within the company or else.

In a statement released with the earnings report, Rabe said, “Our primary goal is to grow the company faster, and to make it more digital and international. We plan to achieve this with four strategic approaches: first, by further consolidating and strengthening our portfolio. Second, by accelerating the transformation to digital of our core businesses. Third, by establishing new growth platforms. And fourth, by expanding into new geographic growth regions. On this basis,?we will reshape Bertelsmann over the next five to ten years.”

In a letter to a professional writers’ list that I’m on, Richard Alan Dickson deconstructed the statement. Rick is a writer who spent twenty plus years in international reinsurance, including ten as a corporate consultant specializing in liquidation, arbitration, and cashflow issues. He worked pretty much every desk within corporate finance, from accounting assistant through Vice President of Finance and Acting CFO of a Fortune 500 affiliate. He pointed out that such statements are crafted for weeks. Rick gave me permission to quote him here. My husband Dean Wesley Smith will put the full post on his site on his blog as a guest post in the next few days, so watch for it.

Rick wrote, “[Bertelesmann doesn’t] want to alarm their employees or their investors (status quo, rosy outlook, a brighter tomorrow, etc), but they needed to put management on notice. That’s the way it’s always done.”

2. Accelerating the transformation to digital: “A big percentage of the readers may continue to read print books, but the infrastructure will no longer be driven by it. Things that NY feels are important, Bertelsmann does not….”

3. New Growth Platforms: “When all those writers conceded all those e-book rights to NY, Bertelsmann noticed the profit margin. Boy, did they notice! … NY may have told them why they can’t have more rights…. It doesn’t matter. Bertelsmann isn’t listening.

“Bertelsmann is shocked by the money pouring in from the e-book ‘platform.’ They see all the years that the money was NOT pouring in. They have no confidence that NY isn’t missing many other opportunities on many other ‘platforms.’ There’s gold in them thar hills, and plenty of writers who’ve proven willing to sign it over. Expect contracts to get even more convoluted with rights grabs into more new areas.”

4. New Geographic Growth Regions. By that, Rick believes that Bertelsmann means more rights, like world rights buys and complete foreign translation buys.

The rest of Rabe’s statement confirms some of Rick’s assumptions here. Rabe said, “We will channel a large share of our investments into new businesses that meet clear guidelines: they should have attractive long-term growth potential, be global, and benefit from developments in digital media. Examples of this are our successful music rights business and new activities in the field of education. At the same time we will widen our footprints in countries like India, China and Brazil.”

There’s the map that Rick followed, the one that the various leaders of Random House are now parroting. Publisher’s Weekly quoted Markus Dohle’s letter to his employees, and the British magazine, The Booksellerquoted Random House UK CEO Gail Rebuck, essentially saying the same thing as Rabe—or trying to—while they work very hard to hang onto their jobs.

In this case, the man behind the curtain (or the woman, as the case may be), isn’t trying to fool little Dorothy, but has actually been exposed as an old fuddy-duddy who doesn’t see how this new path will lead to profit in the future.

The man behind the curtain hasn’t fared real well in the above examples, and I’m pretty sure there will be more such examples over the next several months.

But now let’s look at a person in a traditional publishing company that has been a leader in digital publishing for more than a decade now. Simon & Schuster started experimenting with e-books in the last century and has had a head start on every other major traditional publishing company in the business.

Her background is in digital media, most recently with the company now known as CBS College Sports. She has an MBA from Harvard, and she worked for a while in investment banking.

In other words, she’s not about to hold up the legend that used to be publishing. She knows that this world is about profits, and to make profits, a book company like S&S must go digital.

The interview is fascinating, riveting, and a breath of fresh air. This woman isn’t standing behind a curtain pulling levers. She’s out front, commanding an army of digital professionals that “help[ed] drive Simon & Schuster’s digital revenues up to 17% of overall revenues in 2011.”

Hirschhorn and people like her at other companies like Sourcebooks will shepherd traditional publishing into a new future. Right now, most places in traditional publishing are like Random House: they need to clear out the old to make way for the new. And the way to do that is not to collude with a single company like Apple to control pricing and force consumers to behave in a certain way. The way to do that is to understand the digital marketplace, transform the company to take advantage of it, and to move forward with a new vision in a new way.

The writers who have said that traditional publishing will go away simply do not understand business on this vast scale. What we’re seeing now, in all of these examples, is traditional publishing struggling to not just stay alive but to thrive in the new marketplace.

Traditional publishing no longer has a monopoly, so its business practices must change to reflect that. Those companies that do make the change will become stronger and healthier businesses.

Some of that strength will come on the backs of writers. Note Rick’s mention of convoluted contracts and the desire to own more rights. We’re already seeing that.

But when you’re looking at business on this vast a scale, writers are merely cogs in a gigantic machine, just like employees are, just like certain companies owned by the parent company are. We are figures on a balance sheet, folks, and we need to understand that if we want to stay in business with traditional publishers.

I think writers should listen to the people who are moving away from that green satin curtain. We should look at what they’re trying to do and trying to build, then examine that information in light of what we want for our own writing businesses. Sometimes our needs will align with the traditional publisher; sometimes they won’t.

But writers should no longer naively go to an editor who works for a traditional publisher without looking at that publisher’s business practices, and the statements made by the parent company.

We’re playing in the big leagues, folks. It’s time we admit it.

We have to look for the facts behind the legend, and we have to bring our personal equivalent of Toto to every contact we have with traditional publishers. We need to peer behind that curtain before we work for anyone—if we ever work for anyone again.

Next week marks the three-year anniversary of this blog. You have supported it with your comments, your links, your e-mails, and your hard-earned cash. I appreciate all of it, since this blog has to remain self-sustaining so that I continue to do 3,000 words of nonfiction instead of more profitable fiction.

If you find value in this blog, please leave a tip on the way out. And thanks so much for three years of support!

Damn fine post, Kris (and thanks to Rick too)! Not only is it great information, but it’s also just a great read. What you did with the Oz reference had me cheering just for the use of language alone. Thanks for the entertainment containing that nice slap of education. You sure know how to pretty up that knowledge stick before applying it to the sides of waiting heads.

Russ, Bertelsmann already has its own online book/e-book retailer and has for years, though as far as I know they only operate in the German speaking countries.

And Markus Döhle, the Random House CEO, came straight from the Bertelsmann HQ at Gütersloh and has always been known (and apparently disliked in New York) as a managerial type, so I’m pretty sure that he is onboard with the changes demanded by Bertelsmann HQ. The acceleration to digital bit might refer to the music and movie/TV business (Bertelsmann has been a player in the music industry for ages and own the RTL group, which is a mayor European broadcaster and TV producer) as much as to books. The global expansion bit could apply as much to RTL Brazil or RTL India as to selling books in those locations and probably applies to both.

Besides, Bertelsmann is still running some very old-fashioned business models like the Bertelsmann Book Club, which was the foundation of the company’s success in postwar Germany, in Europe and show no sign of shutting those down, though the Bertelsmann Book Club does offer e-books now. Gruner + Jahr, their magazine and newspaper arm, is still print focused as well (Gruner + Jahr actually owns several large magazine printers, including some in the US), though they offer electronic and online editions. So I doubt that Bertelsmann are planning to get out of print, though they have an eye on the digital developments.

It’s easy for Americans to forget that Random House is just one division of Bertelsmann and not even the biggest or most profitable (RTL certainly makes more money and probably Gruner + Jahr as well). As far as I recall, Markus Döhle was specifically brought in, because Random House wasn’t performing as well as Bertelsmann hoped. And if Random House continue to underperform, they might just end up like Bertelsmann’s music subsidiary BMG, which was sold to Sony, when they continuously underperformed.

Thanks, Cora, for the report from Germany and the history of Bertelsmann. Americans seem to forget that Random House itself isn’t a strictly US publisher. Random (and the book arms of Bertelsmann) are seriously underperforming, and Bertelsmann believes something needs to change.

Back in 2010, when I wrote my initial pieces on the publishing industry, I predicted this is what would happen: that the conglomerates that own the corporations would start looking at each individual business according to its balance sheet, and either force them to improve or sell them off. And now, here it is in public through Bertelsmann. I’m sure it’s going on privately in a lot of other companies as well.

What a bloody brilliant blog. Loved the bit about publishers never having cared about literature. Like most business people hanging onto the coat-tails of the Arts, they care only about money. If this weren’t so they wouldn’t try to sell us so much dross. But putting my own not-so-well-expressed views aside, This is a BRILLIANTLY-written blog. Very best wishes, Lynn.

I very much agree with Rick’s analysis because I have considerable experience working with communications folks crafting such messaging. There is often more behind what is said in writing, much more, (the man behind the curtain is the perfect analogy, Kris)

I tend to think Bertelsmann will try to either buy up as many big e-book retailers as they can, or start one of their own to rival the existing retail outlets. As you say they are multimedia so why not grab not only as many rights as you can from writers, but control the delivery and therefore the profits at that end as well? As Jack says on 30 Rock, it’s vertical integration.

If they controlled some of the retail then those authors who refuse to join them in the pool of the ones they who’s rights they do not control they will at least get some of the profits share, and some of their direct competitors share as well. I don’;t know how the Justice Dept would react if for example this effort was headquartered in Germany. As a friend of mine once said, “with EDI (electronic data interface) we are no longer limited by geography, when can set up on the moon.”

I replied to the S&S interview at DBW. And immediately received a reply from an S&S executive about two errors. Would he have been as interested about my book from S&S which has received not a single speck of interest from the publisher in over two years. I still have not heard from S&S about all their great initiatives for authors, even though I have a book from them still in print. Supposedly.

Scott Turow is no friend of authors. He’s a friend of the publisher that has made him part of the top 5% who get treated with respect. The other 95% of authors are indeed treated as replaceable parts.

Writers create content. Readers consume content. Everyone else is in between and usually in the way.

I know, Bob. Turow is a huge disappointment in that position. He clearly has no clue about anything to do with writers, and he’s supposed to represent them. [sigh]

And yeah, I get a lot of strange e-mails from publishers these days because of my indie sales and my blog. I usually end up laughing…

I have a book with S&S as well. They’re charging $17.99 for the Kindle edition and $26.99 for the crummy trade paperback with awful production values. I signed that contract with them in the late 1990s, before such things as easy POD, so there is no anti-POD clause. The moment I asked for my rights to be reverted, they put the crummy trade paperback out. Then I asked for the e-rights, so they put out the horrible, expensive, embarrassing e-book edition. Helping writers? Not on the backlist…

Mr Lang, I must disagree with your statement in the first comment on this thread — almost entirely. And this is not a defense of dun-dun-DUN The Publishers. It is, instead, an observation from having served on the Dark Side of the Editorial Desk, too.

A publisher (who may be the author, too) does indeed avoid PPF (printing, packing, and fulfillment) by going all-electronic. I do not disagree that this is a significant savings (although you might be shocked at how small it really is — it is virtually never more than 12% for trade books). I do object that it is not, as implied, such a radical savings that it will automatically drag all books down to $9.99 or less. Consider the following fixed/sunk expenses inherent in books, all of which must be paid for to make a product of comparable quality to even the dreck found from commercial publishers:

editing (even if that’s merely a computer-assisted proofread)
ISBN
cover design
cover and/or interior art (and until you’ve managed the permission process for art, don’t assume that this is either cheap or quick-and-easy; here’s an example from my past on the Dark Side)
interior design and layout (which is smaller, but still nonzero, for electronic books)
advertising/marketing copy
etc., etc., etc.

The real disagreement, though, comes from the assumption that all books are pure narrative text, like works of fiction. They’re not; narrative fiction is less than 20% of the printed-book marketplace, measured by either unit sales or revenue. An e-book, by any other name, does not smell of phosphors and electronically charged crystals. Historically (that is, going back to the early 18th century), works of fiction have always followed other works in both availability and price strategy; that’s even true for e-books, if you look at the history of paid-for computer self-help e-books and various interactive textbooks beginning in 1996 and what happened thereafter.

The biggest danger in trying to “reform publishing” is to treat it as a monolithic entity or field. The existence of unfilled niches within the “publishing ecosystem” is precisely what gives “indies” the opportunity to thrive.* Further, as Our Gracious Hostess’s other half noted on his blawg not so long ago, even in the current system, not all publishers are equal. Even within these publishers, there has never been agreement on a uniform price across all books; that has, at most, been an effort by distributors like the Big Brazilian River Company, in an effort very much like K-mart and Sears and Circuit City to manage warehousing issues and depress the necessary skill level of employees (and therefore employee compensation). Gee, I wonder whatever happened to those corporations?

There simply is no justification for saying that “e-books must be $9.99 or less”, or indeed any other price; just ask any lawyer what he’d think about the Patry or Nimmer or Wright & Miller treatises if they were reduced to $9.99, or even $9.99 per volume. Until the “indie-published” trade fiction author community recognizes that it does not have the power or authority to set prices — and neither does the relatively small proportion of the potential market that buys copies of its books — the argument over the “right price point” for e-books is going to resemble arguments over the number of angels that can dance on the head of an LED even more than it will the choreography for the dance number.

* Just like real ecosystems, though, there are going to be a lot of “indies” who do not survive to reproduce; whether that’s from predation, ecosystem damage, the Malthus effect, or some combination of these and other causes is beside the point.

I’d like to point out that while it’s true that Amazon has been (incredibly) disruptive in electronic publishing, and their business practices have benefitted independent writers, that benefit is coincidental. It just happens to align with their own profit engine.

Prior to Apple’s announcement of iBooks, Amazon’s modeled their ‘discount’ percentage on the book industry. They took 55% of the sale price and passed 45% to the publisher/author. It was Apple’s entry into this market – and their agency pricing model that takes 30% (the same as they do for music and apps) – that made Amazon lower the percentage they took from writers and publishers.

Yes, Jak, competition is very good. I know that Amazon doesn’t do anything for the writers that isn’t in Amazon’s best interest, nor do I expect it to. That caretaking attitude that most writers have comes from being indoctrinated by traditional publishing that someone else has their best interest at heart.

I am not surprised that a business–especially one of Amazon’s size–operates according to its own business. Right now, its business and mine happen to work in harmony. Whether or that continues will remain to be seen. I’m still stunned, however, at how naive Turow is. He doesn’t seem to understand that for most writers, Amazon is not harmful. In fact, Amazon has helped our bottom lines tremendously.

I had a few disconcerting thoughts while reading your post here. Primarily, I think there’s often been a push-pull relationship within publishing between literary types and business types. I think an argument could be made that the literary types did a pretty crappy job of running the business, if for no other reason that they seemed so disconnected with the types of books readers actually bought (although I think it goes far deeper and broader than that). And I suspect, although I am not quite as confident in this, that the business types had an often even bigger disconnect with the books – many of them treated books as interchangeable widgets and were mostly irritated that they had to deal with so many writers, essentially interfacing with an endless stream of cottage industries/independent contractors – and bemoaned the lack of focus groups, etc.

And now we’re seeing an industry that’s probably going to be dominated (if it survives, not a given) by tech people. I’m not confident that tech people care that much about the product they’re producing, i.e. books, to the extent they might other products, and that may just further that divide.

On the other hand, if you view the tech types as being mostly focused on developing high-level, efficient, elegant platforms for moving data – ANY data – then it wouldn’t matter much if the writers found that platform useful, or composers, or musicians, or photographers or filmmakers, etc.

Maybe too philosophical, but it does seem to me there are some culture clashes going on now and will continue.

I think you’re absolutely right, Mark. I also think that tech types dominating isn’t a bad idea, since they’ll use numerical ways of judging sales. Since we can’t judge quality quickly–one quest fantasy is not the same as another–we let the readers do so by buying what they like and helping the algorithms along. We are in for interesting times.

I have long thought that one of the directions publishing will go in the next generation will be something like how they handle media tie-in books now. (Or like old time book packagers did.) They’ll create branded lines and hire writers on a staff or work-for-hire basis.

It’ll work a lot more like Hollywood, in other words. If they buy from freelancers, they’ll buy the property up front, and the writer’s involvement may even end at “creator” credit.

That won’t be all of publishing, but it makes sense in terms of the kind of rights grab and platform development you’re talking about here.

I expected a far more articulate response from publishers. After all, they’re working in an industry defined by articulacy and spin. Half-assed arguments like those put forward by Turow (presumably with the approval if not the active encouragement of publishers) makes me wonder about their professionalism as a whole.

I was very interested in one of your earlier posts re having a book conventionally published as a sort of ‘lost leader’ in order to encourage readers to buy one’s e-books. What would be a typical contract in this regard? And do you think agents might be hostile to representing somebody under such terms? I’m guessing the author makes certain concessions in order to make such a deal more attractive to both agent and publisher (two-book deals are the norm in the UK) but I really don’t know.

Do remember, Aonghus, that Turow is not a publisher, and he probably did consult with his publisher when all this went down, but he’s supposed to represent writers. (Oh, don’t get me started.) I think he has no clue what’s happening in the industry.

As for your question about loss leaders, you might want to click back through and look at my contract posts as well as look at Laura’s comments about hiring someone other than an agent. Because you’re right: an agent won’t like the loss leader idea. It cuts the agent out of the bulk of the financial loop. That’s a short answer to a complex question, but I hope it helps.

Another great post, but if I put my Gadfly Extraordinaire hat on for a minute, I wonder if both Rick and Jeremy’s articles may be a little pessimistic in their interpretations of the corporate world’s likely process and outcomes…I’m not sure they are all “top-down driven” changes as Rick suggests and, if not, the transformation process may change as a result.

Here’s my thinking:
1. As Dean has ranted recently, the BIG 6 are not homogenous clones.

2. While Big Publishing is antiquated and tied to old models, it doesn’t mean they are ALL equally tied and that no innovation is being considered or happening.

3. Large conglomerates don’t do these messages as “one-offs” that come as surprises to their entities — it’s part of long-term internal discussions and messaging, and tend to be iterative.

4. Those large businesses have internal people who can read as well as we can, can see the writing on the wall, and sees success in digital being had elsewhere. And in different WAYS than just expanding their current model.

But, despite those four elements, we tend to assume that Big Publishing is going to continue to act stupidly, kind of a collective ostrich form of cloud thinking.

And while Rick reads it as putting “Random House” on notice, how do we know that there aren’t internal people at Random House who WANT that wording? Maybe not a majority yet, but within spitting distance of an internal tipping point.

For example, any editor who had a book they loved but couldn’t push wants more openness. Any young bright eager beaver coming in sees the benefits of the new world, and wants to embrace it. Suppliers are constricting them, bloggers are bashing the old ways, etc. There are lots of forces causing their current jobs to suck — so lots of INTERNAL incentives too to change things. Maybe not EXACTLY the way a writer wants them to go, but change from inside.

So, while Rick’s analysis assumes “more of the same”, I don’t think ALL of the publishers are going to do “more of the same”. Increased competition drives one thing — innovation and differentiation. Maybe not all will survive, but eventually, one of the BIGGIES will “get it” and switch. And where one goes, the profits will follow and the rest are doomed to match or fail.

I’m sure it will be iterative, and Rick’s early options may be right — more rights grabs, etc. But that isn’t the only option, and as those consolidations take place in places like RH, and an internal group of VPs drop from 8 to 4 (for example), it is the four most “innovative” that will get to stay. Those whose mgmt philosophies are in line with the “new business model”, even if they don’t yet know what that business model will look like.

I guess what I’m trying to say with too much verbiage is that we are assuming the pervasiveness of myopic cloud thinking amongst the Big 6 which is hard to square with the fact that a LOT of the non-senior personnel within their world are pretty tech savvy and seeing the same changes that everyone else is. And maybe they don’t get traction yet, but they will (by force or by choice) and the pessimism of Rick’s analysis that “as it is now, so will it continue to be” seems doubtful to me.

I think those internal changes are going to happen quicker than a lot of us have predicted…maybe not across the board, but some of the imprints surely.

PolyWogg, perfect. Thank you for all the time you took on that analysis. You’re right: traditional publishers are not monolithic (which is why I pointed y’all to the S&S side of things) and stuff changes from within. (See Nancy’s comment.) I think you’re exactly right: there are people inside the company who are cheering this, while others are quaking in their boots. You’ll see if you look at all the documentation that the head of Bertelsmann released all of this with the Random House report, so his comments were directed at Random House, and the heads of the various branches of Random House then released their statements the same day, essentially saying, “Yes, sir, great idea, sir, we’re happy to comply.” We’ll see how many of them have their jobs in six months…

Essentially, he put Random House on notice: fix this broken company, go after the profits, or else. And the tech savvy non-senior personnel are cheering.

that the Justice Department should reconsider because (horror of horrors!) such a suit would benefit Amazon, which Turow sees as a Wicked Witch of the West

If we throw water on Jeff Bezos, will he be melting, melting, melting? 😉

And talk about stark differences between Random House and S&S. It seems as if the old guard always tries to hang on, kicking and screaming, when something new comes in, unwilling to try and learn new stuff. I got a little taste of that at a job I was at a number of years ago, where the people who processed executive’s expense reports expected all of us assistants to write out everything on a lined packet, stuffing the receipts inside the packet.

On my own, I constructed a simple spreadsheet and stapled it to the outside of the packet. Altho the woman in accounting who processed the reports was miffed, they eventually took my idea and proclaimed that all and sundry were to use the spreadsheet template for expense reports from then on. (The woman I originally sent the packets to left the company a few months after I started, grumbling all the way.)

In the scheme of things, that’s a blip on the radar screen, but it proved something to me – Be flexible, learn things. You’ll make yourself invaluable to a lot more people that way.

And isn’t being flexible and learning things in this new indie world what you and Dean have suggesting all along? 🙂

Wonderful post! I’m trying as new writer to learn about both sides. I would like puvlish in both traditional and self publishing. I write romance and YA.I have found some nice small publishers. I write a lot of gay romance for both adult and YA. Besides self publishing it myself it has been hard finding publishers that go down that street. I have been lucky to find some.
What I have found seem to be on board in the new digital world at least.

Thanks, Vera. Yes, romances with gay storylines. Only some companies do that. (Suzanne Brockmann has been writing romances with gay couple subplots for years, but she electronically published a full romance with gay characters. I don’t know if that was indie or not.) I think the indie world will open up a ton of subgenres like the one you describe, that traditional publishers were afraid to approach. Good luck with the writing!

I’d like to add to Mr. Dickson’s prediction about “New Growth Platforms.” I believe that Random House will spend more time and money strengthening its brand and gathering customer data in order to sell direct or at least curate to the public (and get out from under Amazon’s thumb). Many publishers are already moving in this direction, but I think Bertelsmann wants results yesterday from RH. A new version of Bookish (or another such “platform”) could be on the horizon for them.

This makes sense from a business perspective. But from a readers perspective, it’s a nightmare. I can’t imagine fumbling around six or eight or twenty different publisher sites to find a book I want to read when they’re all currently aggregated at Amazon. I shudder to think of a day when they’re not. Bye-bye browsing.

Good points, Monica. Yes, I’m sure they will. In fact, if you look at the Bookseller article (I think), someone at Random mentions doing just that. Browsing will be point and click with a mouse over various sites–for some traditional companies. It’ll be strange, but we’ll get used to it.

P.S. Just wanted to add that something that has come up in some private emails I’ve received this year from pro writers mired in problems with majors houses is indeed that they’re operating under the terms of contracts which it is by ow clear to them their literary agents don’t understand, advised them to sign without fully understanding, and have accepted substantial payment (15% of all earnings on the contract) for
“services” which included “negotiating” a contract incompetently and advising the client to sign something which the agent didn’t sufficiently understand.

Thanks, Laura. All good things to remember. Aonghus, Laura answers part of your post with her discussion of agents. Follow the link to the IP attorneys for that. And if you’re in the UK (it seems like you are), you can still hire a US attorney for a US contract. (You can also hire a UK attorney.)

Kris wrote: “But writers should no longer naively go to an editor who works for a traditional publisher without looking at that publisher’s business practices, and the statements made by the parent company.”

Additionally, when entering into contractual negotiations with a publisher, writers should not be relying for their representation on people who are NOT attorneys with extensive experience at negotiating publishing contracts.

When signing a contract with a publisher–particularly when we’re talking about major houses, i.e. the sort of big publishing conglomerates discussed in today’s post–you’re typically dealing with a complex legal document that’s 8-25 pages long, and you’re dealing wih a company which has its own legal department overseeing contracts. With the advent of digital rights, you’re also entering into an agreement with a large corporation which is well aware that it benefits by tying up as many of your intellectual property rights as thoroughly as possible for as long as possible (as in: decades).

Do you (generic “you” here: the writer) REALLY feel competent to negotiate that contract by yourself? Knowing that a corporate legal department is on the other side of the negotiating table (even if your editor is the only person you’re actually given access to during negotiations)?

More to the point: Do you really want a LITERARY AGENT negotiating for you, knowing that your agent–who has no legal training, no licensing, no expertise in contractual language, and who (like far too many agents) probably doesn’t even UNDERSTAND a number of the clauses in the contract–is negotiating opposite a corporate legal department in this scenario? (Even though, in your agent’s case, too, the editor may well be the only person to whom the agent has access during these negotiations.)

Or, given the circumstances and what’s at stake, do you want your contractual negotiations handled by a trained, licensed attorney who’s experienced in negotiating publishing contracts and who has substantial current knowledge, with regard to the contract being negotiated, of the legal issues at stake and the real-world ramifications, in each clause, for you and your intellectual property–including books NOT included in the contract, since (as we saw in the Riverhead incident last year) there are instances of publishers claiming that the terms of a contract for a particular work ALSO dictates what you can do with your OTHER works.

Do you REALLY want someone who is NOT a lawyer–and who doesn’t even UNDERSTAND all the clauses on the table, and who has no training in legal negotiations–negotiating that contract for you?

I currently recommend several attorneys in this field on my website. I’m following several others, too, but do not yet recommend them, since I ONLY recommend attorneys on a personal basis–either I have to have had dealings with the attorney or someone I know/trust/respect has to have done so and recommend them to me. That doesn’t mean that the only good literary lawyers are the ones I recommend; it means that I am confident that the ones I recommend are good.

one troubling thing from the wired article “$9.99 or less for every book was and remains unsustainable for retailers and publishers alike.”

given the avoided costs (printing, shipping, warehousing, returns, etc) this is highly questionable, and there are several publishers who have been selling their books at prices below this sucessfully for quite a while (as useual Baen is a good example)

He also claims that e-books sales are bad for independant publishers “Amazon’s wholesale pricing might take a chunk out of big publishers’ hardcover sales, but it decimates independent publishers.”

David L., you must always remember that the mainstream press writes from the point of view of traditional publishing, even Wired. When he says “independent publishers” he does not mean writers publishing their own material. He means smaller and regional presses not affiliated with corporations. They have owned the term “independent publisher” for decades. So he’s right–because those independent publishers go through distributors, which is the whole problem that IPG has with Amazon. (I may have the acronym wrong. I’m in a hurry this a.m, and I’m not checking stuff) IPG is a distributer that distributes independent books to Amazon, and takes a cut before Amazon takes theirs. That’s been a big problem in the past two months, and that’s what he’s referring to.

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